Two new issues have breathed life into the equity-linked market in Europe, the Middle East, and Africa (EMEA).

The market had been sluggish due to subdued corporate financing demands, which has led to a lack of issuance of equity-linked bonds (debt instruments with an embedded share option).

However, the market has sprung back to life with a cash-settled convertible bond issued by Vinci SA [EPA:DG], the French provider of concessions, energy, and construction services; and Citigroup Global Markets Holdings’ exchangeable bond in Airbus Group SE [EPA:AIR].

The deals, valued at USD 413m and USD 391m respectively, helped volumes reach USD 1.3bn in 1Q 2025, according to Dealogic data.

This marked a significant increase from the previous quarter, where volumes reached only USD 369m. Since 4Q23, volumes have not surpassed the USD 3bn mark, largely due to well-capitalised companies, reduced M&A activity, and strong cash flows diminishing the need for fresh financing.

To put this into perspective, total volumes in EMEA last year stood at USD 6.1bn, bolstered by issuances from Schneider Electric SE [EPA: SU], TUI AG [ETR:TUI1], Ocado Group plc [LON: OCDO] and LEG Properties BV [ETR: LEG], to name a few. However, this figure was well overshadowed by total volumes in the US, which stood at USD 96bn, as well as Asia-Pacific (APAC), with USD 38.8bn.

“One reason for subdued activity in EMEA is that many companies emerged from COVID well-capitalised, with strong cash reserves, reducing the need to tap the markets,” an ECM banker said. “Additionally, M&A activity remains muted, and solid cash flow for many companies further lessens the need for fresh financing.”

Despite the limited issuance, there remains strong interest from issuers; and long investors looking to balance their portfolios show robust demand for convertible bonds (CBs).

“Corporate appetite is growing for converts; however, they are yet to tap the market,” an ECM banker said. “Investors are eager for new deals as maturing instruments and soaring credit valuations fuel demand.”

Despite this pent-up demand, there remains a scarcity of new issuance in Europe, hindering investors’ CB strategies, a convertible bond investor noted.

“In Europe any deal that is benchmark eligible just gets taken up by index funds, no matter the terms, it isn’t a good situation,” the investor said. “if you want to run a global CB strategy you have to be invested in the US or Asia.”

Nevertheless, a major driver of CB activity this year is likely to be the COVID-era converts due for redemption. Around EUR 16bn in CB redemptions are due in Europe this year, with some expected to be refinanced through buybacks and reissues.

“While there will be a mix of CB buybacks and fresh issuance, buybacks are likely to dominate,” a CB banker said.

The pipeline for CBs in EMEA is promising, driven by upcoming redemptions, though new issuance remains a challenge.

As the market shakes off its post-COVID lethargy, perhaps the recent Vinci and Airbus deals could be the starting gun for a more active converts market this year.

“With results season ending soon, more CB activity could emerge from mid-February onwards,” the ECM banker concluded.